I’ve been thinking about two questions making the rounds this week; will the Kraken fill the open spot on the active roster? And will the Kraken add a piece at the deadline? These are multi-faceted questions, but they relate in part to the specialty of this Kraken Contracts series: the collective bargaining agreement and, specifically, the calculation of a team’s cap space.
Before getting back to these two top-line questions later in the post, though, we have to start at the beginning. How much salary cap space does the team have, and how is it calculated? Let’s start there.
How much salary cap space does Seattle have? (And why will the answer be different tomorrow?)
For the 2022-23 season, the salary cap (or “team payroll range upper limit” as it’s called in the CBA) is $82,500,000.
A team’s contracts count against the salary cap based on the average annual value (“AAV”) of the contract.
Example. Presume a player signs a two-year standard player contract with Seattle that actually pays him a total salary of $2 million in year one and $3 million in year two. The contract would nonetheless carry a cap hit of $2.5 million each season because the contract has a $2.5 million AAV.
From here it should be straight forward to calculate a team’s available cap space (or “payroll room” in the CBA), right? Unfortunately, no. There are a few steps involved.
The first inflection point is what day is it on the calendar? The rules for calculating cap space are different at various times. Today, I will focus on how cap space is determined during the regular season.
During the season, there are two key considerations: First, which obligations count toward the salary cap? And, second, how do we account for a player whose contract counts towards a team’s salary cap for less than the entire season? I will address each.
All player contracts count against the cap if the player is on the active roster or on injured reserve. (As we discussed last time, a long-term injury may allow a team to exceed the salary cap, but the injured player’s contract AAV still counts.) Other sums like retained salary, buy outs, or earned bonuses (as we also discussed last time) will count against the cap too.
Additionally, a portion of the contracts for players who have been loaned to another professional league (almost always the AHL) also counts against the cap. What portion? The amount by which the player’s AAV exceeds $375,000 plus the NHL minimum salary, which is $750,000 for the 2022-23 season.
Example No. 1. Assume Seattle waives Cale Fleury and his $750,000 AAV contract, Fleury clears waivers, and is assigned to the AHL. In that circumstance Fleury’s contract would no longer count against the cap because it is below the $1,125,000 threshold and can be fully “buried” in the AHL.
Example No. 2. Now presume Seattle waives Morgan Geekie and his $1,400,000 AAV cap hit, Geekie clears waivers, and goes to Coachella Valley. Geekie’s contract would continue to count $275,000 toward to the cap, which is the excess above $1,125,000.
Example No. 3. Finally, assume Seattle waives Geekie to try to get him to the AHL, but another NHL team claims him. In that scenario, Geekie’s AAV would come off Seattle’s books and go onto the books of the claiming team.
On the first day of the regular season, when counting each contract and other obligations required to be counted against the salary cap as described above, the team must be compliant with the salary cap.
Moving forward from there, how is a team’s available cap space calculated? And how do we account for the fact that a player may only play a partial season with a team, spend some time in the AHL at a reduced cap hit, or variety of other circumstances?
Assume there is a team that plays the first two months of the season with a 22-man active roster totaling $80,000,000 AAV in contracts. And then on Dec. 15, the team signs a free agent to a one-year, $2,500,000 AAV contract. The team had unused cap space for a couple months, but, as of Dec. 15, it now has $82,500,000 AAV in contracts on the books. Does the unused cap space from the first two months just disappear? The answer is no.
The NHL accounts for this inevitable roster shuffling by tabulating a team’s available cap space daily during the season. Huh? Let me explain how this works.
A regular season is 186 days long. The 2022-23 season spans Oct. 11, 2022, to April 14, 2023. Each day, at 5:00 pm ET, 1/186th of each team contract (or other obligation) that counts against the cap is totaled. On day one of the season, this total must be equal or less than 1/186th of the $82,500,000 salary cap (except for LTIR scenarios). To the extent the team is under the cap on day one, the difference accumulates as available “cap space.” That total is then available to be used on day two, along with another 1/186th of the salary cap. If not all used that day, it continues to accumulate. The team remains cap compliant if it does not exceed its available cap space on any given day.
This is all a bit confusing, so let’s take a look at how this works with a few examples.
Example No. 1. Presume on day one of the 2022-23 season, a team has a 22-man active roster with $80,000,000 AAV in cap obligations. The team is cap compliant because the 2022-23 salary cap is $82,500,000. 1/186th of the team’s $80,000,000 aggregate AAV—$430,107.53—is totaled at the end of the day. The difference between that amount and 1/186th of the full salary cap—$443,548.39—accumulates as of the end of the day. The team has accumulated $13,440.86 in excess cap space. On day two the team will be cap compliant if their salary obligations total less than $456,989.25. That is the sum of another 1/186th of the full salary cap—$443,548.39—plus the accumulated carryover cap space from the previous day—$13,440.86. That cap space will continue to accrue day-over-day until it is used later in the season, if at all. What would that look like?
Example No. 2. Same setup as Example No.1. On day two of the regular season the team adds a 23rd player to the roster with a $3,000,000 AAV. The team’s cap commitments for day two now equal 1/186th of $83,000,000. This is $446,236.60. Subtract from the team’s total day two cap space—$456,989.25—the team’s cap charge for day two and the team comes out of day two with $10,752.65 in excess cap space. The team has less accrued unused cap space left over than day one, but that makes sense because the team is now carrying players on its active roster worth $83,000,000 AAV. This is over the full season salary cap of $82,500,000. The team won’t be able to keep the new player on the roster for long, or it will need to make another move. How does this look at the trade deadline?
Example No. 3. Same setup as Example No. 1, except the team maintains the same 22-man roster every single day until the March 3, 2023, trade deadline—a total of 143 days. The team accrues $13,440.86 in excess cap space daily for a total of $1,922,042.56 in accrued cap space. At the trade deadline, just 43 days remain in the season. At that point, the team could, in theory, acquire a 23rd player with more than a $10,500,000 AAV contract. How so?
The team has accumulated cap space so far because it is in aggregate AAV $2,500,000 under the cap. If the team added a $2,500,000 million AAV contract at the deadline, it would stop accumulating additional cap space every day moving forward, but it would still have the extra $1,922,042.56 in cap space sitting there, unused. Divide that unused cap space by the number of regular season days remaining after the trade deadline (43) and you get $44,698.66. This is the amount the team could eat into that accrued, unused cap space every day and still be cap complaint on day 186. $44,698.66 per day equates to a contract with a full season AAV of $8,313,951. Add to that $2,500,000, and you get $10,813,951. This number is the AAV of the contract(s) this hypothetical team could add at the trade deadline.
Applying this (admittedly unintuitive) accounting method, the Kraken have an aggregate AAV of $81,064,166 currently. This is below the $82,500,000 cap, so the team is accumulating excess unused cap space each day.
But the team’s aggregate AAV has not been static throughout the season. The team has made myriad roster moves, each impacting the daily salary cap calculations and how much excess cap has accumulated on this day or that day. My best estimate is, as of Jan. 12, 2023, before the 5:00 pm ET deadline, the Kraken have approximately $467,838 in accrued, unused cap space.
Matty Beniers skating to retreive the puck. (Photo/Brian Liesse)
What does this mean for the roster? And what does it mean for what the team can do at the trade deadline? Let’s get into that now.
Why haven’t the Kraken added a 23rd player to the active roster?
NHL teams are allowed to have 23 players on the active roster at any given time. Before the World Junior Championship, the Kraken loaned Shane Wright to the Canadian U20 Team. This moved Wright off the team’s active roster and created an opening. Ever since, the team has maintained just 22 players on the active roster. For a time, one might have assumed the team was just holding Wright’s spot for him, but with Seattle returning Wright to the OHL after the WJC, that spot has remained conspicuously vacant. Why?
The short answer is that circumstances have not forced Seattle to add any players. The Kraken are not dealing with any short-term injuries at the moment, nor are there any players that need to be benched for performance reasons. As it stands, the Kraken still have an extra forward and an extra defenseman, and they haven’t needed any additional flexibility.
The longer answer gets us back into daily salary cap accrual, and the contracts of Matty Beniers and Eeli Tolvanen. As we discussed last week, the team likely wants to keep $925,000 in cap space open at the end of the season in order to pay Matty Beniers’s contract bonuses without carrying the overage as a deduction from next year’s cap.
If the Kraken made no moves at all and maintained the current 22-man active roster from now through the end of the season, Seattle would end with a season-end cap charge of approximately $81,347,544. Applying Beniers’s (likely) earned bonuses, the Kraken would be at $82,272,544. This leaves the Kraken just $227,456 below the cap. In other words, the Kraken project to have $227,456 that they could allocate to the daily salary cap charges of a 23rd player.
The NHL minimum salary for the 2022-23 season is $750,000 AAV. For example, John Hayden is signed to a contract worth $750,000 AAV at the NHL level. Since he has been loaned to the Coachella Valley Firebirds all season, his contract has not counted against Seattle’s salary cap at all. But it would begin to count if Hayden were recalled. (John Hayden is actually on a so-called “two-way” contract that pays him less at the AHL level. We can get into the details on two-way contracts another time, but for today’s purpose suffice it to say Hayden has not counted against Seattle’s cap.)
For each day a contract worth $750,000 AAV is on the NHL roster it would count $4,031.26 against the salary cap—i.e. 1/186th of $750,000. Without going above $227,456, the Kraken could have a minimum-salary player in the 23rd spot on the roster for up to 56 days. Yet, as of Jan. 12, 2023, 93 days remain in the regular season.
This starts to shed light on why the Kraken have not filled the 23rd roster spot right now. They might “need” a 23rd player later if injuries arise. Once fewer than 56 days remain in the season (after Feb. 17, 2023), the team will be less hesitant to fill the final roster spot. But, over the next 37 days, the Kraken are likely to play “wait-and-see” and hope to avoid filling it unless necessary.
You might protest, as the Kraken had a full 23-man roster until recently; what changed? First, as the season has unfolded, it has become increasingly clear the hypothetical possibility of Beniers receiving $925,000 in bonuses will be a reality. And, second, the team jumped at the opportunity to add Eeli Tolvanen off waivers. That was a good move on the ice. But the unexpected upgrade pushed the Kraken ever closer to the salary cap. Replacing Karson Kuhlman’s contract ($825,000 AAV) with Eeli Tolvanen’s contract ($1,450,000 AAV) put an additional $625,000 AAV on the cap. With the minimum salary being $750,000, this delta essentially eliminated the opening for an extra minimum-salary 23rd player for a while.
Eeli Tolvanen waits for a face-off. (Photo/Brian Liesse)
What can the Kraken add at the trade deadline?
How much contract money the Kraken can add at the trade deadline (March 3, 2023) will depend on a number of variables, including whether the Kraken fill the 23rd roster spot in the interim.
Assuming that the Kraken make no roster moves of any cap consequence between now and the trade deadline, the Kraken could acquire a contract with a $1,140,000 AAV while protecting the necessary cap space for Beniers’s bonuses.
That is… not a lot.
However, the Kraken can create additional space in a variety ways. For example, presume Joonas Donskoi is healthy enough to return from injured reserve by the time of the trade deadline, and the Kraken waive him that day for the purpose of assigning him to the AHL. If he clears waivers, $1,125,000 AAV of his contract would come off the books, as explained above. Totaled with the team’s other cap space, Seattle could then add a player with a $2,265,000 AAV contract.
Another way to create space could be to trade a roster player. When a player is traded (or claimed off waivers), the player’s contract comes off Seattle’s books moving forward. For example, if the team traded a player at the deadline with a $2,000,000 AAV, it could acquire back a player with a $3,140,000 AAV when adding in the team’s accrued cap space.
Also, it should be noted that a trading team can “retain” up to 50 percent of a player’s salary (and cap hit) in a trade transaction. This expands the scope of potential trade targets available to Seattle. For example, without making any other moves, Seattle could acquire a $2,000,000 AAV player at the deadline if the trading team agreed to retain 50 percent of the player’s salary. That said, these types of trades are typically more costly from an assets perspective.
Finally, I should mention that the type of contract Seattle could acquire changes drastically if the team decided not to protect cap space for Beniers’s bonuses. In that case, without any roster moves in the interim, Seattle could acquire a $5,141,000 AAV contract at the deadline. I doubt that Seattle would go this way, but this approach would open a wider range of upgrades for the team.
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Have contract or rules-related questions? Reach out on twitter (@deepseahockey or @sound_hockey) or in the comments below. I’d like to do a mailbag-style post soon. Thanks for reading.